Rural credit startup Sarvagram in talks to raise over $50-million funding round

Existing investors, including Elevar Equity, Elevation Capital, Temasek and TVS Shriram Growth Capital, are also expected to participate in the primary capital infusion.

“They have been aggressively expanding the offline channels, known as Sarvamitras, beyond current operations in four states,” a source said of the company’s plans.

Queries sent to Sarvagram did not elicit a response, while Peak XV, Temasek and Elevation declined to comment.

Sarvagram operates an on-ground franchisee model for distributing both credit and non-credit products. The franchise owners, known as Sarvamitras, are local residents trained by the firm to facilitate credit access through its non-banking finance arm (NBFC) arm Sarvagram Fincare Private Limited (SFPL) and partner lenders.

It also provides farm mechanisation (pay per use basis) solutions and insurance for the rural customers.

Sarvagram operates 125 branches across Gujarat, Maharashtra, Karnataka and Rajasthan, with plans to expand further during the ongoing financial year, including entry into new states while also deepening its presence in existing ones.

This funding round comes over a year after Sarvagram raised $35 million from a group of private equity investors.

The growth trajectory

Founded by Utpal Isser and Sameer Mishra in 2018, Sarvagram's unique selling proposition lies in its focus on the untapped, growing segment of aspirational semi-urban and rural households, which are classified as “underbanked but creditworthy”.

The platform categorises its customers into three segments — salaried, farm, and micro, small, and medium enterprises (MSMEs) — to offer a range of loans, including gold, housing, personal, farm, and consumer durable loans.

It operates through a household-centric lending model that treats the entire household as a cohesive economic unit, unlike traditional underwriting models that assess individual income or paying capacity before sanctioning a loan.

These households include those with a “chief wage earner” drawing a monthly salary, households owning or cultivating agricultural land or dairy farms, or those involved in manufacturing, trading, or retail services such as handicrafts, agricultural implements, doctor’s clinics, kirana stores, pharmacies, electrical shops, footwear shops, wholesalers and clearing and forwarding (C&F) agents.

The loans are issued by Sarvagram Fincare and partner lenders, which include IDFC First, AU Small Finance Bank, Caspian Debt, Vivitri, Western Capital, Northern Arc, UC Inclusive Credit, Oxyzo, Ambit Finvest, and Alteria Capital.

Financial turnaround

Though SFPL’s operations are in early stages with high operational costs, the NBFC turned profitable in FY24, reporting profit after tax of Rs 7.6 crore. The group entity, Sarvagram Solutions Private Limited (SSPL), continues to operate at a loss, the provisional numbers shared by ICRA ratings in a note show.

SSPL narrowed net loss to Rs 11.6 crore in FY24, which was 65 percent lower than the previous year, with total assets under management (AUM) growing 1.5 times to Rs 1,166 crore, it added.

In addition to its NBFC arm, in which Sarvagram holds a 79.6 percent stake, the firm provides non-lending financial services such as farm mechanisation solutions and insurance distribution, in the geographies served by SFPL through Sarvamitras.